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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The best time to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. The president has imposed a cap on the currency to tame triple-digit price increases and now it remains overvalued and reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to reclaim command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to bring inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Solely large-scale economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing reckless spending, he recently abandoned a pledge for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.